Traders are paying 'extortionate fees' to short Snapchat

Traders are paying 'extortionate fees' of 15% to 20% to borrow shares of Snap in order to short them, according to figures reported by Simon Colvin, a research analyst at IHS Markit.

Snap shares surged 44% in their March 2 debut and hit a high of $28.84 the following day before short sellers emerged, driving the price below $21 on Tuesday. Snap recovered a bit on Wednesday, settling at $22.81.

While the fees are "extortionate," they're still well below the 45% that traders paid to short Facebook shares in the days following their debut May 2012 debut. Snap's fees are more in line with the 19% that traders paid to short Twitter after it went public in November 2013. Notably, short sellers were ready to pay a huge fee of 105% to go short Groupon shares.

According to calculations by Reuters, short sellers borrowed about 1.5% of all freely traded Snap shares on March 7 (first day the shares became available for borrowing in the market).

Here's how borrowing fees on Snap shares compared to other social media IPOs.

Get the latest Snap stock price here.